# AddEx LO4 - EXERCISE 7-1 ITEMS ON A BANK RECONCILIATION LO...

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EXERCISE 7-1 ITEMS ON A BANK RECONCILIATION LO 1 1. D—Bank 4. D—Book 7. NA 2. D—Book 5. A—Book 8. A—Book 3. A—Book 6. A—Bank 9. A—Book PROBLEM 7-5 ALLOWANCE METHOD FOR ACCOUNTING FOR BAD DEBTS LO 3 1. Accounts Receivable 840,000 Cash 210,000 Sales Revenue 1,050,000 To record sales for year: \$1,050,000 X 80% = \$840,000 credit sales. Assets = Liabilities + Owners' Equity +840,000 +1,050,000 +210,000 Cash 670,000 Accounts Receivable 670,000 To record collection of customer accounts. Assets = Liabilities + Owners' Equity +670,000 –670,000 Allowance for Doubtful Accounts 4,000 Accounts Receivable 4,000 To record write-off of accounts receivable. Assets = Liabilities + Owners' Equity +4,000 –4,000 2a. Bad Debt Expense 25,200 Allowance for Doubtful Accounts 25,200 To record estimated bad debt expense: \$840,000 X 3%. Assets = Liabilities + Owners' Equity –25,200 –25,200 3a. The net realizable value of accounts receivable on December 31, 2006 is \$282,450 :

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Accounts receivable, Dec. 31 (from Part 2b. ) \$ 306,000 Less: Allowance for doubtful accounts, Dec. 31 (\$2,350 – \$4,000 + \$25,200) 23,550 Net realizable value, December 31 \$ 282,450 4. The recognition of bad debt expense reduces the net realizable value by the amount recorded in bad debt expense and the allowance for doubtful accounts. The write-off of accounts has no effect on the net realizable value. PROBLEM 7-11 ACCOUNTS RECEIVABLE LO 3 1. Journal entries: 2006 May 15 Accounts Receivable, C. Brown 5,000 Sales Revenue 5,000 To record sale on credit; terms net 30. Assets = Liabilities + Owners' Equity +5,000 +5,000 Aug. 10 Allowance for Doubtful Accounts 5,000 Accounts Receivable, C. Brown 5,000 To write off uncollectible account. Assets = Liabilities + Owners' Equity +5,000 –5,000 Dec. 1 Accounts Receivable, C. Brown 5,000 Allowance for Doubtful Accounts 5,000 To restore account previously written off. Assets = Liabilities + Owners' Equity +5,000 –5,000 Dec. 1 Cash 5,000 Accounts Receivable, C. Brown 5,000 To record collection on open account Assets = Liabilities + Owners' Equity +5,000 –5,000 2005 Jan. 31 Cash 4,060 Interest Receivable 30 Interest Revenue 30
Notes Receivable 4,000 To record collection of note and interest. Assets = Liabilities + Owners' Equity +4,060 +30 –30 –4,000 2. Brown is interested in reestablishing a good credit standing with its supplier, Linus, and for this reason has sent the check and signed a note for the balance. PROBLEM 7-12 INTERNAL CONTROL PROCEDURES (APPENDIX) LO6 1. List of procedures to follow: a. Ring the sale on the cash register, and give every customer a receipt. b. Accept the money, and count the proceeds before putting it into the drawer. c.

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## This note was uploaded on 10/19/2011 for the course ACCT 2241 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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AddEx LO4 - EXERCISE 7-1 ITEMS ON A BANK RECONCILIATION LO...

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